ATHAR MINALLAH, J.---This petition has been filed under section 160-A of the Companies Ordinance, 1984 (hereinafter referred to as the 'Ordinance of 1984') for having the proceedings of the Annual General Meeting held on 30.04.2015 and the resolution passed therein as invalid.
2. The facts, in brief, are that the petitioner is a public listed company incorporated and existing under the Ordinance of 1984. The respondent company is also incorporated under the Ordinance of 1984 and, admittedly , the petitioner company holds 30% (thirty percent) of the total voting power in relation to the said company . The respondent company sent a notice dated 06-04-2015 in respect of the Annua l General Meeting which was scheduled for 30-4-2015. The business proposed to be transacted in the said meeting was mentioned in paragraphs 2 to 4 of the notice. The notice contained a note informing the membe rs that they-could exercise their right of vote at the meeting by appointing another member as a proxy to attend and vote. It was further informed that the proxies, in order to be effective, must be delivered at the Company's registered office not later than 48 hours before the time scheduled for holding the meeting. It was further mentioned that copies of the audited Annual Accounts along with the Consolidated Accounts of the Company together with the Directors' and Auditors' report thereon, for the year ending on 31.12.2014, were also enclosed. It is asserted by the petitioner company in paragraph 6(viii) of the petition that pursuant to notice dated 06.04.2015, its representative, namely Haroon Iqbal, had attended the Annual General Meeting . However , it is asserted that the representative abstained from attending the meeting after becoming aware of some order passed by the Securities and Exchange Commission of Pakistan (hereinafter referred to as the 'SECP').
3. The learned counsel appearing on behalf of the petitioner has contended that; the requirements as prescribed in section 160-A of the Ordinance of 1984 are satisfied; the mandatory legal requirements relating to a notice for an Annual General Meeting were not fulfilled; the notice, dated 06.04.2015, suffered from material defects and omissions; the material defects and omissions as alleged by the petitioner company have been summarised in the written arguments and the same are reproduced as follows.- No. Mandatory Statutory Requirements Application to the instant Case
1. Notice for AGM must contain a statement of business to be transacted at the meeting - section 160(1)(a)Impugned notice fails to satisfy which business is special and which is ordinary , hence fails to satisfy this condition per se - Impugned Notice at page 57 of the Petition
2. Notice for AGM must contain statement setting out material facts concerning special business - section 160(1)(b) and (c)No such statement attached to impugned Notice, with particular reference to Agenda Item 2 of alleged previous AGM of 16 July , 2016
3. Form of Proxy must be attached to the Notice - section 161(2)Impugned Notice does not satisfy this material requirement
4. The right to inspect proxy must be clearly specified in the Notice - section 161(2), (5) and (7)Impugned Notice does not satisfy these material requirements
5. Director's Report must be attached to the Notice - section 160(1)(b)Impugned Notice does not satisfy this material requirement
6. Auditor's Report must be attached to the Notice - section 160(1)(b)Impugned Notice does not satisfy this material requirement
7. Accounts must be attached section 233 Impugned Notice does not satisfy this material requirement
8. Notice must be sent to all shareholders and the auditors - section 160(1)(a)(i) and (iii)Impugned Notice does not satisfy this material requirement
9. Notice must be published in a newspaper because International Finance Corporation is a foreign shareholder and has given address in Washington DC, USA- section 50(3)Impugned Notice does not satisfy this material requirement. Form A on page 44 of the Petition evidences the overseas address of IFC
10. Notice must be of one form and kind with all the above attachments and satisfying the above requirements.
Selective compliance From member/shareholder to member/shareholder is not validImpugned Notice does not satisfy this material requirement. At least three dif ferent variations have been placed on record - at pages 57 and 58 of the Petition and at page 22 of the W ritten Statement of Respondent Company
4. It was, therefore, contended that the impugned notice does not satisfy the conditions as mentioned above; section 160(1) and section 233 read with section 230(vii) provides that non compliance of the mandatory requirements attracts a penalty; the failure to comply with the statutory provisions in the context of the notice tantamounts to material defects and omissions; the petitioner is not required to show a personal adverse consequence, rather the rights of shareholders/ members must be adversely affected so as to attract the remedy provided under section 160-A; reliance has been placed on the cases of 'M. Shahid Siagol and 16 others v. M/s. Kohinoor Mills Ltd. And 7 others' [PLD 1995 Lahore 264], Naveed Textile Mills Ltd. Karachi v.
Central Cotton Mills Limited SITE Kotri, District Dadu and 2 others' [PLD 1997 Karachi 432]; the notice was issued in violation of Articles 44, 49 and 50 of the Articles of Association of the respondent company; the minutes ought to be circulated and confirmed; the proceedings of the meeting held on 30-04-2015 were illegal and in violation of section 150(1); the quorum was not complete as one of the shareholders, holding 57.5 % shares, was abroad and had not sent a proxy as required by law; another shareholder holding 10 % shares i.e, 'International Finance Corporation', had also not attended the meeting; the quorum was, therefore, not complete; the shareholder holding 57.5 % at the time of the meeting was abroad and, therefore, could not have sent a valid proxy as the same was neither authenticated by the relevant Embassy/Mission of Pakistan nor was properly stamped under sections 18 and 35 of the Stamp Act 1899; not only was the notice materially defective but the proceedings and the manner in which the meeting was conducted was also in violation of the provisions of the Ordinance of 1984; the notice is in violation of section 160(1)(a)(iii), section 160(1)(b), section 161; the respondent company refused to allow the representative of the petitioner attending the meeting to inspect the proxies.
5. The learned counsel appearing on behalf of the respondent company has argued that; the petitioner has not been able to make out a case under section 160-A of the Ordinance of 1984 as it has failed to disclose how it was prevented from using its rights as a shareholder; the essential requirement for invoking section 160-A is twofold i.e, that there must be a material defect or omission in the notice of the meeting, or an irregularity in the proceedings of the meeting and secondly , that the material defect, omission or irregularity in proceedings must be shown to have prevented the petitioner from effectively using its rights as a shareholder; any such material defect or omission in the notice, or irregularity has not been shown or established; the proxies were lodged with the respondent company and were available for inspection at all times, and the petitioner at no stage made any request to inspect the same; the petitioner has also not sought to lead evidence to prove that at any time it had verbally requested the inspection of the proxies; the petitioner's own stand that its representative walked out of the Annual General Meeting establishes that the petitioner was not prevented from effectively exercising its rights but, rather , voluntarily decided to abstain from the proceedings; even if the proxies are not attested or sufficiently stamped, this would not render the document ineffective; the quorum was complete and the shareholder holding 57.5 % shares had not only validly exercised his rights, but had admittedly observed the proceedings through video-link; no objection has been raised by the said shareholder or any other shareholder regarding the proxy; the argument that the notice, dated 30.04.2015, was not issued to the Auditors of the company is incorrect and misconceived; a copy of the notice issued to the Auditors of the company has been attached with the reply; the contention that the notice was not issued to the 'International Finance Corporation' is also factually incorrect; the said corporation had attended the meeting held on 30.04.2015; the said Corporation itself has not expressed any grievance in this regard; the notice dated 06.04.2015 was duly received by the petitioner company as a copy thereof has been attached at page 57 of the petition.
6. The learned counsel have been heard and the record perused with their able assistance.
7. The petitioner is seeking a declaration for having the Annual General Meeting held on 30.04.2015 to be held as invalid. The questions for consideration are, firstly , the scope of section 160-A of the Ordinance, 1984, secondly the requirements for holding the Annual Gene ral Meeting, particularly with reference to the rights of the members of a company and lastly , whether the petitione r has made out a case within the scope of section 160-A for declaring the meeting as invalid.
8. Section 160-A is a remedy available to the members of a company to have a general meeting declared invalid. A plain reading of the said provision shows that in order to invoke the remedy contemplated therein the following ingredients must exist.-
(i) The petition would be competent if filed by members having not less than 10% of the voting power in the company .
(ii) The grounds on which a general meeting may be declared invalid are;
(a) Any material defect or omission in the notice or
(b) Irregularity in the proceedings of the meeting which has the effect of preventing the members from using effectively their rights.
(iii) The limitation prescribed for making a petition is 30 days from the date of the meeting.
9. If the above conditions are satisfied then the Court may declare such proceedings or part thereof as invalid, and direct the holding of a fresh general meeting. It is, therefore, obvious that a General Meeting can be declared invalid if the members having the prescribed threshold shareholding can show that there was either a material defect or omission in the notice or an irregularity in the proceedings of the meeting which had prevented members from using their rights effectively . The legislature has explicitly used the expression 'material in relation to the defect or omission in the notice. Materiality is, therefore, crucial and mere defect or omission will not be enough to have the General Meeting declared invalid. Would an omission or defect in the notice which does not prejudice a member from exercising rights contemplated under the Ordinance of 1984 be treated as 'material'? The Black's Law Dictionary defines 'Material' as 'Important; more or less necessary; having influence or effect; going to the merits; having to do with matter , as distinguished from form; Representation relating to matter which is so substantial and important as to influence to whom made is material'. Materiality , therefore, is measured in terms of the effect or impact in the context in which it occurs. In the context of section 160-A, the materiality of the omission or defect in the notice obviously would be judged in terms of its effect and impact in relation to the rights of the aggrieved shareholder and the prejudice caused thereto. Likewise, the irregularity of the proceedings of the meeting has been explicitly circumscribed in the context of preventing the members from 'effectively using their rights'. Not every irregularity in the proceedings of the meeting would attract section 160-A. A member has to establish that the 'members' were prevented from effectively exercising their rights because of the alleged irregularity in the proceedings. Illustration in this regard would be an abrupt change of the venue of the meeting or proceedings held at a place which cannot accommodate the members or resolutions passed without giving opportunity to the members to speak or exercise right of vote. However , the irregularities must be of a nature which would have prevented members from effectively using their rights. When the provision is read as a whole it clearly brings out the intention of the legislature in as much that the remedy refers to or is in the context of protecting the rights of the members and the effective use thereof. Moreover , the language of section 160-A does not show that a member or members competent to invoke the remedy can do so in favour of other members regardless of whether their personal rights have been prejudice d or not. The member(s) invoking the remedy under section 160-A has to show that the irregularity in the proceedings was such that it had prevented mem bers from effectively using their rights. The language of section 160-A reflects the legislative intent to safeguard the sanctity of an Annual General Meeting but simultaneously enabling a member(s) to safeguard their rights which may have been infringed because of material omission or defect in the notice, or irregularity in the proceedings, thereby preventing 'members' from effectively exercising their rights. I am afraid that the argument raised by the learned counsel for the petitioner that the rights of the shareholders/members as a whole must be adversely affected and, therefore, the petitioner was not required to demonstrate the latter being prevented from effectively using rights due to a material defect or omission in the notice or irregularity in the proceedings of the meeting is not in consonance with the legislative intent of the remedy provided under section 160-A of the Ordinance of 1984. The irregularity in proceedings ought to be of a nature which would have had the effect of preventing 'members' from using their rights effectively and, therefore, would include the members competent to invoke the remedy under section 160-A.
In the facts and circumstances of the insta nt case, it would be pertinent to examine the rights of the 'members' of a company in relation to the holding of an Annual General Meeting and the proceedings thereof.
10. Section 158 of the Ordinance of 1984 makes the holding of a General Meeting a mandatory statutory obligation for every company incorporated ibid. The time and conditions for holding a general meeting have been described in the said provision. The rights of a member , as provided in the dif ferent provisions, may be summarised as follows.-
(i) Section 158 (3), makes it mandatory to send to a shareholder at least 21 days before the date fixed for the meeting a notice of an Annual General Meeting. In case of a listed company such notice in addition to its being despatched in the normal course is also required to be published at least in one issue each of a daily newspaper in English as well as in Urdu language.
(ii) Section 160(1)(a). The notice is required to specify the place and the day and hour of the meeting along with a statement of the business to be transacted at the meeting. It is mandatory to give the notice to every member of the company , any person entitled to a share in consequence of death of a member if such person is known to the company , and to the auditor and auditors of the company .
(iii) The notices are required to be served in the manner as provided in section 50. It may however , be noted that accidental omission to give notice to, or the non-receipt of notice by, any member does not invalidate the proceedings at any meeting. However , in the eventuality that the omission to give notice is deliberate then it may be a ground for declaring the meeting invalid. Reference may be made to Musselwhite v. CH Musselwhite and Sons [1962] 1 All ER 201
(iv) Section 160(1)(d). Every member is entitled to participate in the meeting either personally or through proxy .
(v) Section 160(5). A member holding shares or other securities carrying voting rights cannot be debarred from causing his or her vote nor anything contained in the Articles shall have such an ef fect.
(vi) Section 160(7). In the event of a poll, a member may give vote either personally or through proxy .
11. As a sequel to the above, it is obvious that every company incorporated under the Ordinance of 1984 has a statuary duty to hold an Annual General Meeting at least once in every calendar year. The rights of the members include, inter alia, giving of a notice i.e, informing that a meeting would be held and containing the information or contents as prescribed in this regard, existence of quorum for a meeting, to attend the meeting, to speak and vote on a resolution in person or through a proxy . The materiality of the omission or defect in a notice, or irregularity in the proceedings of a meeting is in the context of such rights of the members. I would, therefore, now advert to the grounds raised in the petition for the purposes of seeking a declaration to have the general meeting held on 30.04.2015 declared as invalid. In the petition, as well as in the written arguments, ten defects and omissions in the notice or irregularity in the proceedings have been alleged. The same are discussed in chronological order as have been reproduced above.- First, that the notice failed to specify as to which business was special or ordinary . Perusal of the notice, dated 06.04.2015, clearly shows that the business which was intended to be transacted in the meeting scheduled for 30.04.2015 was intelligibly mentioned. The notice fulfilled the requirements prescribed under section 160(1)(a).
Neither was there an omission or defect let alone material, nor has any infirmity been pointed out so as to make out a case of prejudice having been caused to the petitioner in so far as the rights are concerned. It is not the case of the petitioner that any 'special business' was transacted in the meeting held on 30-04-2015 not forming part of the contents of the notice.
Second, that the notice did not contain a statement setting out material facts concerning special business as required under section 160(1)(b) and (c). As already noted above, the business which was intended to be transacted was clearly stated in the notice. There is no ambiguity regarding what business was to be transacted at the meeting. The notice unambiguously mentions the business which was to be transacted, therefore, the objection is neither relevant nor in any manner could have caused prejudice to the petitioner .
Third, the form of proxy was not attached with the notice and thus section 161(2) was violated. The said provision makes it mandatory for the company to prominently set out the member's right to appoint a proxy and the right of such a proxy to attend, speak and vote in place of the member at the meeting. Every such notice is required to be accompanied by a proxy form. Perusal of the notice reveals that the information, as contemplated in section 161(2), was prominently set out therein. Even if a proxy form was not attached no prejudice was caused to the petitioner as it had no intention to exercise its right to attend, the meeting through a proxy . Even if it is assumed that the form of proxy was not attached with the notice, it cannot not be treated as a 'material omission or defect in the facts and circumstances if the instant petition. It is not the case of the petitioner that it was deprived or prevented from attending or voting at the meeting because the form of proxy was not attached with the notice.
Fourth, the right to inspect the proxy was not specified in the notice and thus section 161 (2)(5)(7) was violated. As already noted above, the requirements of section 161(2) had been substantially complied with and even if the form of proxy was not accompanied with the notice it could not be treated as a material omission in the context of section 160-A in the facts and circumstances of the instant case. Subsection (5) of section 161 provides that the proxies shall be lodged with the company not later than 48 hours of the meeting. There is.No requirement in so far as the contents of the notice are concerned that every information is to be included therein. It is the statutory right of every member entitled to vote at a meeting to inspect, during the business hours of the company , all proxies lodged with the company as provided in section 161(7). The petitioner ought to have been aware of this statutory right and such information is not required to be included in the notice nor can its omission be construed as material so as to invalidate the meeting.
Fifth, the Director's report was not attached to the notice and, therefore, there was a violation of section 160(1)(b).
The petitioner has not been able to point out as to what special business was transacted which would have attracted clause (b) of subsection (1) of section 160. It is not the case of the petitioner that 'special business' was transacted and the failure of attaching the Director's report had prejudiced the rights of the latter .
Sixth, the auditor's report was not attached to the notice and thus section 160(1)(b) had been violated. The auditor's report was made available to the members, including the petitioner , as stands established from the record.
Nothing has been placed on record to show that after receiving the notice, dated 06-04-2015, the petitioner had informed the respondent company in this regard.
Seventh, accounts were not attached with the notice and thus section 233 was violated. There is nothing on record in this regard nor has the petitioner made out a case in the context of materiality of an omission or defect.
Eighth, notices were not sent to all the shareholders and the auditors and thus section 160(1)(a)(i) and (iii) had been violated. The petitioner has attache d a copy of notice dated 06.04.2015 with the petition at page 57 and a bare perusal thereof shows that the same was sent and received by the petitioner . No other member or shareholder has raised a grievance in this regard. Notice to the auditors has been placed on record by the respondents.
Ninth, the notice was not published in a newspaper as prescribed under section 50(3) because one of the foreign shareholders i.e, 'International Finance Corporation' has given address outside Pakistan. Admittedly , the said Corporation has not raised any objection; rather it had attended the meeting held on 30.04.2015. However , assuming that there had been noncompliance of section 50(3) of the Ordinance of 1984, even then the rights of the petitioner had not been adversely affected nor was it prevented from exercising its rights effectively . The objection, therefore, cannot be treated as material in so far the rights of the petitioner is concerned.
Tenth, it is alleged that the notice was not of the same form and kind rather selective compliance from member/shareholder to member/shareholder , and therefore, it was invalid. By no stretch of the imaginations can such an objection be treated as a material omission or defect and thereby raising a ground for invalidating the general meeting. Even otherwise, nothing has been placed on record in support of this assertion.
12. It is, therefore, obvious that the petitioner has not been able to identify any defect or omission in the notice which may be treated as material and thus render the meeting held on 30-04-2015 as invalid. The petitioner has also not been able to demonstrate that even if there was any omission or defect in the notice, then either its rights were prejudiced by such omission or defect or it was prevented from effectively exercising its rights. The ten alleged defects and omissions discussed above in the context of section 160-A either do not exist or are definitely not material so as to render the general meeting as invalid.
13. There is also no force in the argument advanced by the learned counsel for the petitioner that the quorum for the meeting was not complete because one of the members, namely Zia-ur-Re hman Farooqui, holding 57.5% shares was abroad and had not sent a proxy as required under the law and the Ordinance of 1984. Admittedly , the said member had exercised his right to attend and vote through a proxy and had also witnessed the proceedings through a video link. No grievance has been raised by the said shareholder nor was his proxy challenged by any other member . The assertions made in the petition also establishes that the petitioner had abstained from participating or exercising its rights in the meeting held on 30-04-2015 rather than being prevented from doing so.
The petitioner has not been able to point out any defect, irregularity or illegality relating to the proxy so as to declare the same as invalid. As already noted above, the petitioner , inter alia, had a right to inspect the proxy during the business hours of the company or during the meeting. Nothing has been placed on record to indicate that the petitioner had made an attempt and the same was met with the refusal by the respondent company . It is further admitted that a representative of the petitioner , namely Haroon Iqbal, had attended the meeting and had also signed the attendance sheet, as is obvious from the record. The proxy not being stamped or attested from the Embassy , Mission or Consulate is also of no relevance as it could not have had any effect or bearing on the rights of the petitioner . Moreover , it is not an irregularity sufficient to declare the proxy as not being valid and thus treat the quorum for the meeting as not being complete and, therefore, declare the meeting as invalid.
14. For what has been discussed above, there is no merit in the instant petition and no case is made out to declare the meeting held on , 30.04.2015 as invalid.
15. The petition is, therefore, accordingly dismissed.